BOB KINNAIRD. The Coalition’s Backpacker tax and work rights package

The Coalition’s backpacker policy announcement yesterday focussed on tax rates but also includes a significant expansion of work rights under Australia’s working holiday maker program (WHM or 417 and 462 visas). …. The Coalition’s main aim is to provide an increased supply of cheap and captive foreign labour to the agricultural sector on a long-term basis. But the new policy applies to WHMs in all sectors.

The Coalition’s Backpacker tax and work rights package

The Coalition’s backpacker policy announcement yesterday (‘Better working holiday maker tax arrangements’) focussed on tax rates but also includes a significant expansion of work rights under Australia’s working holiday maker program (WHM or 417 and 462 visas).

The policy was announced by Treasurer Morrison and Deputy Prime and Agriculture Minister Joyce with the Immigration Minister sidelined and nowhere to be seen, heard from or even mentioned.

The main elements of the ‘Better working holiday maker’ visa package are:

Reduced tax rates for those on working holiday visas (19 per cent on earnings up to $37,000, rather than the 32.5 per cent announced in the 2015-216 Budget, with ordinary marginal tax rates applying after that.) Employers will have to register ‘once-only’ with the ATO to withhold tax at the 19 per cent rate.

Allowing an employer with premises in different regions to employ a WHM for 12 months, with the WHM working up to six months in each region.

Expanding the age of eligibility for a WHM visa from 18-30 currently to 18-35 years, and reducing the WHM visa application charge by $50.

A $10 million Tourism Australia global advertising campaign promoting jobs in Australia for young foreign nationals (but no campaign to promote seasonal agriculture jobs to young Australians).

Funding the Federal Budget financial impacts of all WHM measures by increasing the departure tax for all departing passengers and increasing the Departing Australia Superannuation Payment on WHMs ($260m and $105m respectively over the forward estimates).

The Coalition’s main aim is to provide an increased supply of cheap and captive foreign labour to the agricultural sector on a long-term basis. But the new policy applies to WHMs in all sectors.

It will therefore have adverse impacts on wages, job and training opportunities for young Australians and particularly lower-skilled workers not just in agriculture or tourism (the other main vested interest) but across the board including in the cities.

The new policy also shows up the limitations of the Turnbull government’s economic strategy of depending largely on growth in agricultural exports as the new saviour of the side post the mining boom.

The Coalition spruiks its Free Trade Agreements claiming they open up greater market access for Australian agricultural exports. But this strategy apparently relies on the continued availability of a large pool of cheap, captive temporary foreign labour in Australia to do much of the work.

The National Farmers Federation says backpackers make up 25 per cent of Australia’s agricultural labour force and up to 85 per cent in the Northern Territory (ABC Rural News, 15 August 2016).

Neither the NFF nor the Coalition is upfront about why this is so. The chief explanation is simple: since 2005, WHMs on 417 visas have been able to acquire a ‘second-year WHM visa’ by doing 3 months work in regional Australia in horticulture (now agriculture), and more recently also in construction and mining.

As a result, young foreign nationals wishing to stay and work in Australia for a second-year have been available as virtual captive labour for the agriculture sector because their employer must sign off on the 3 months work for the second visa to be approved. Employers including farm labour contractors have the whip-hand.

Nearly 40,000 WHMs on 417 visas obtained their second-year WHM visa by doing 3 months work in agriculture in 2014-15. The numbers have declined recently, but not as rapidly the first year WHM visa grants (from 250,000 to 215,000 pa).

Backpacker websites are full of complaints about farm employers involved in wage exploitation and even physical and sexual exploitation of WHMs working for their ’88 days’ to get the second-year WHM visa.

The Fair Work Ombudsman says nearly half (44 per cent) of all visa-holders who sought the FWO’s assistance in 2015-16 were 417 visa-holders

The Fair Work Ombudsman has concluded a lengthy inquiry into the wages and conditions of 417 visa holders doing work for their second-year WHM visas and says the findings will be released soon (‘Beef farmer faces court action for allegedly short-changing 417 visa-holders $38,000’, FWO media release 28 September 2016).

There are many drivers of backpacker numbers to Australia, including job opportunities in backpackers’ home country and in Australia. Some other reasons behind declining backpacker numbers will most likely become clearer once the FWO report on abuses in the second-year WHM visa scheme is released.

Bob Kinnaird is Research Associate with The Australian Population Research Institute and was National Research Director CFMEU National Office 2009-14.